Domingo v.

Garlitos
Labrador, J (June 29, 1963)
Facts:
1. In Melecio Domingo v. Judge Moscoso
SC declared as final and executor the order of payment by the estate of Walter Scott Price
of estate & inheritance taxes, charges, and penalties @P40K.2. Petition for execution of this
judgment was sought

Atty Benedicto submitted: a. Note by the then Pres. Carlos Garcia directing the Dir. Of Lands
to pay Mrs. Price (administratix of Walter Prices estate) @P369,140
b. RA 2700, page 765: appropriating P262,200 for payment to Mrs. Price.3. CFI: Petition
DENIED, execution is not justifiable since the Govt is indebted to the estate. The payment of
the claim of CIR deferred until the Govt has paid this debt. Hence this petition to Set Aside
the above order.
Issue:
w/n the set-off/deferment of the claim of CIR is proper.
Held:
It is proper. Compensation/set-off of taxes may happen by operation of law when both debts
are due and demandable.
1. The ordinary procedure to settle claims before an estate is not a petition for execution,
but by presenting a claim before the probate court. a. Aldamiz vs. Judge of CFI MindoroExecution may issue only where the devisees, legatees or heirs have entered into
possession of their respective portions in the estate prior to settlement and payment of the
debts and expenses of administration and it is later ascertained that there are such debts
and expenses to be paid, in which case "the court having jurisdiction of the estate may, by
order for that purpose, after hearing, settle the amount of their several liabilities, and order
how much and in what manner each person shall contribute, and may issue execution if
circumstances require" (Rule 89, section 6; see also Rule 74, Section 4; Emphasis
supplied.)b. Legal basis is the fact that the properties belonging to the state are under
custodia legis, which continues until said properties have been distributed among the heirs.
2. Court having jurisdiction also found that the claim of the estate has been recognized by
the govt and has already appropriated the corresponding amount.
3. Claim of the Govt for inheritance taxes against the estate is due and demandable. The
claim of the estate against the Govt is also due, demandable and is fully liquidated.
Compensation, therefore, takes place by operation of law, in accordance with the provisions
of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the
concurrent amount.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-18994

June 29, 1963

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner,

vs.
HON. LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of
Leyte,
and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of the late Walter Scott
Price, respondents.
Office of the Solicitor General and Atty. G. H. Mantolino for petitioner.
Benedicto and Martinez for respondents.
LABRADOR, J.:
This is a petition for certiorari and mandamus against the Judge of the Court of First Instance of
Leyte, Ron. Lorenzo C. Garlitos, presiding, seeking to annul certain orders of the court and for
an order in this Court directing the respondent court below to execute the judgment in favor of
the Government against the estate of Walter Scott Price for internal revenue taxes.
It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674,
January 30, 1960, this Court declared as final and executory the order for the payment by the
estate of the estate and inheritance taxes, charges and penalties, amounting to P40,058.55, issued
by the Court of First Instance of Leyte in, special proceedings No. 14 entitled "In the matter of
the Intestate Estate of the Late Walter Scott Price." In order to enforce the claims against the
estate the fiscal presented a petition dated June 21, 1961, to the court below for the execution of
the judgment. The petition was, however, denied by the court which held that the execution is not
justifiable as the Government is indebted to the estate under administration in the amount of
P262,200. The orders of the court below dated August 20, 1960 and September 28, 1960,
respectively, are as follows:
Atty. Benedicto submitted a copy of the contract between Mrs. Simeona K. Price,
Administratrix of the estate of her late husband Walter Scott Price and Director Zoilo
Castrillo of the Bureau of Lands dated September 19, 1956 and acknowledged before
Notary Public Salvador V. Esguerra, legal adviser in Malacaang to Executive Secretary
De Leon dated December 14, 1956, the note of His Excellency, Pres. Carlos P. Garcia, to
Director Castrillo dated August 2, 1958, directing the latter to pay to Mrs. Price the sum
ofP368,140.00, and an extract of page 765 of Republic Act No. 2700 appropriating the
sum of P262.200.00 for the payment to the Leyte Cadastral Survey, Inc., represented by
the administratrix Simeona K. Price, as directed in the above note of the President.
Considering these facts, the Court orders that the payment of inheritance taxes in the sum
of P40,058.55 due the Collector of Internal Revenue as ordered paid by this Court on July
5, 1960 in accordance with the order of the Supreme Court promulgated July 30, 1960 in
G.R. No. L-14674, be deducted from the amount of P262,200.00 due and payable to the
Administratrix Simeona K. Price, in this estate, the balance to be paid by the Government
to her without further delay. (Order of August 20, 1960)

The Court has nothing further to add to its order dated August 20, 1960 and it orders that
the payment of the claim of the Collector of Internal Revenue be deferred until the
Government shall have paid its accounts to the administratrix herein amounting to
P262,200.00. It may not be amiss to repeat that it is only fair for the Government, as a
debtor, to its accounts to its citizens-creditors before it can insist in the prompt payment
of the latter's account to it, specially taking into consideration that the amount due to the
Government draws interests while the credit due to the present state does not accrue any
interest. (Order of September 28, 1960)
The petition to set aside the above orders of the court below and for the execution of the claim of
the Government against the estate must be denied for lack of merit. The ordinary procedure by
which to settle claims of indebtedness against the estate of a deceased person, as an inheritance
tax, is for the claimant to present a claim before the probate court so that said court may order the
administrator to pay the amount thereof. To such effect is the decision of this Court in Aldamiz
vs. Judge of the Court of First Instance of Mindoro, G.R. No. L-2360, Dec. 29, 1949, thus:
. . . a writ of execution is not the proper procedure allowed by the Rules of Court for the
payment of debts and expenses of administration. The proper procedure is for the court to
order the sale of personal estate or the sale or mortgage of real property of the deceased
and all debts or expenses of administrator and with the written notice to all the heirs
legatees and devisees residing in the Philippines, according to Rule 89, section 3, and
Rule 90, section 2. And when sale or mortgage of real estate is to be made, the
regulations contained in Rule 90, section 7, should be complied with.1wph1.t
Execution may issue only where the devisees, legatees or heirs have entered into
possession of their respective portions in the estate prior to settlement and payment of the
debts and expenses of administration and it is later ascertained that there are such debts
and expenses to be paid, in which case "the court having jurisdiction of the estate may, by
order for that purpose, after hearing, settle the amount of their several liabilities, and
order how much and in what manner each person shall contribute, and may issue
execution if circumstances require" (Rule 89, section 6; see also Rule 74, Section 4;
Emphasis supplied.) And this is not the instant case.
The legal basis for such a procedure is the fact that in the testate or intestate proceedings to settle
the estate of a deceased person, the properties belonging to the estate are under the jurisdiction of
the court and such jurisdiction continues until said properties have been distributed among the
heirs entitled thereto. During the pendency of the proceedings all the estate is in custodia legis
and the proper procedure is not to allow the sheriff, in case of the court judgment, to seize the
properties but to ask the court for an order to require the administrator to pay the amount due
from the estate and required to be paid.
Another ground for denying the petition of the provincial fiscal is the fact that the court having
jurisdiction of the estate had found that the claim of the estate against the Government has been

recognized and an amount of P262,200 has already been appropriated for the purpose by a
corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the
Government for inheritance taxes and the claim of the intestate for services rendered have
already become overdue and demandable is well as fully liquidated. Compensation, therefore,
takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of
the Civil Code, and both debts are extinguished to the concurrent amount, thus:
ART. 1200. When all the requisites mentioned in article 1279 are present, compensation
takes effect by operation of law, and extinguished both debts to the concurrent amount,
eventhough the creditors and debtors are not aware of the compensation.
It is clear, therefore, that the petitioner has no clear right to execute the judgment for taxes
against the estate of the deceased Walter Scott Price. Furthermore, the petition for certiorari and
mandamus is not the proper remedy for the petitioner. Appeal is the remedy.
The petition is, therefore, dismissed, without costs.
Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ.,
concur.
Bengzon, C.J., took no part.